Roll out a roadmap to rebuild agriculture

FOR any discerning reader, this is a shocking revelation — in two decades, the price of bread in Switzerland has doubled, but the farmgate price of wheat has come down by half. This is an arrangement that has kept everyone happy, except the farmers.

Policymakers are again skirting the real cause of farm distress — falling farm incomes.

A former chairperson of the Punjab Farmers’ and Farm Workers’ Commission, Ajay Vir Jakhar, recently tweeted: “Twenty years ago, the price of bread in Switzerland was 2.5 Swiss francs (CHF) and the price of wheat was 110 CHF per kg. Today, the price of bread is 4 CHF and the price of wheat is 50 CHF per kg.” Sometime back, I had shared an example from Canada, where wheat prices had tumbled over the past 150 years but bread prices had zoomed in the past four decades. This disturbing trend of declining farm output prices is not exclusive to Switzerland and Canada — it is more or less a global phenomenon. For over a century now, farm prices have been declining steeply, pushing farmers to either commit suicide, abandon agriculture or struggle to survive against all-pervasive distress. This is food inequality.

People who produce food end up living perpetually in poverty. Often, it has been seen that the farm prices are low and do not even cover the cost of production. The tragedy is that those who bring food to our tables can’t even afford to feed themselves. With successive governments pushing for increased productivity, the farmer’s welfare was simply overlooked. Very cleverly, while farmers felt easily elated when called annadata, the other stakeholders in the agricultural supply chains rolled in profits. In the process, farmers have been rendered bankrupt.

While farmers suffer and rural wages stagnate, the broken food system has kept consumers happy. Keeping food prices deliberately low and pushing them still lower with every passing year, and at the same time extracting excessive profits — seller’s profit, as it is now called — has led agribusiness companies to laugh all the way to the bank. Although corporates blame rising wages and supply chain bottlenecks for the rising prices, studies have shown that in the US, for instance, in the second and third quarters of 2023, corporate profits fuelled 53 per cent of the inflation. Further, corporate profits jumped after the Covid pandemic, reaching a record high by the last quarter of 2023. In the four decades prior to the pandemic, the contribution of corporate profits to inflation was only around 11 per cent.

For over a century and a half, the economic design had denied rightful prices to farmers. Obviously, with policymakers turning a blind eye to the deepening crisis on the farm front, rural anger only gets highlighted in the election season. ‘India’s government claims to subsidise farmers, but actually hurts them’ (The Economist, July 12, 2018) provides an interesting insight. While the OECD (Organisation for Economic Cooperation and Development) countries, the richest trading bloc, provide an equivalent of 18 per cent of the farm income to producers, India actually ends up taxing them.

Accordingly, 6 per cent of the farm income is appropriated on an average in India. In another OECD study, it became clear that while Indian farmers lost 15 per cent on an average by way of low prices between 2000 and 2016, the real benefit accrued to consumers, who gained by 25 per cent in subsidised prices.

As the Finance Minister gets ready to present the full Budget for 2024-25, it is time to visualise what kind of economic policies are needed not only to assuage farmers’ growing anger but also to lay out a roadmap for rebuilding agriculture. Remember what economist Jean Dreze had remarked: “Political discourse in India normally takes place within certain boundaries set by the privileged and powerful. If you overstep these boundaries, expect some trouble.” Agriculture needs out-of-the-box thinking, however much may it upset the governing elite.

All these years, the predominant route to raising farm incomes has been through more budgetary support for technological interventions. Even with the move towards digitalisation, artificial intelligence, robotics and precision farming, thereby bringing agriculture increasingly into the corporatisation lap, it has to be acknowledged that while the industry around agriculture has and will benefit immensely from such budgetary support, farmers continue to be pushed deeper into distress.

Productivity gains haven’t translated into living income for farmers. If farm incomes continue to be at the bottom of the pyramid even 60 years after the Green Revolution, the promise of technological transformation towards Agriculture Revolution 4.0 cannot be seen as a panacea for all the ills afflicting agriculture. As usual, policymakers are once again skirting the real cause of farm distress — falling farm incomes — and trying to cover it up with the flawed thinking that technological interventions will boost incomes.

Amid ‘global boiling’, resilient agriculture will come from regenerative farming practices. More than artificial intelligence, what is needed is to first utilise available natural intelligence. It is important to first invest in building the capacity and potential of human population engaged in agriculture. The dominant economic thinking will not be comfortable with this, but the time has come to look beyond the pre-designed parameters.

Given that agriculture is the biggest employer in the country, employing 45.5 per cent of the workforce, making agriculture a profitable enterprise is the need of the times. The conventional thinking of helping the industry which, in turn, will help raise farm incomes — conforming to the trickle-down principle — is unlikely to work.

To remove food inequality, there is a growing need for fresh thinking. First, provide a legal mechanism for guaranteeing farm prices as per the MS Swaminathan formula; secondly, the Finance Minister should ensure that 50 per cent of the Budget is allocated for roughly half of the population. To begin with, start enhancing the farm budget every year by 10 per cent of the total. At present, it is less than 3 per cent.